Mortgage and student loan delinquencies decline

The Daily Shot: 19-Nov-20
The United States
Canada
The United Kingdom
Europe
Asia – Pacific
China
Emerging Markets
Commodities
Energy
Equities
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
Residential construction remains robust, with single-family housing dominating growth.
 
Housing starts and building permits:
 


 
Single-family starts and permits:
 


 
Single-family starts vs. the 2008 recession:
 
Source: Mizuho Securities USA  
 
Multifamily housing construction has slowed as Americans seek more space and less crowded areas. Growth in urban rents has weakened substantially this year.
 
Source: Piper Sandler   
 
Moreover, there is a significant overhang of multifamily housing under construction.
 

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Low mortgage rates have capped US households’ total interest payments, even as homeownership rises.
 
Source: @business   Read full article  
 
The CAPE model shows that hosing valuations are approaching the pre-2008 peak.
 
Source: @bopinion   Read full article  

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2. Next, we have some updates on household credit.
 
Buyers with top credit scores have been driving the surge in mortgage financing (2 charts).
 
Source: Pantheon Macroeconomics  
 
Source: Federal Reserve Bank of New York  
 
This chart shows mortgage originations by age:
 
Source: Federal Reserve Bank of New York  
 
How has consumer credit changed over the past four quarters?
 
Source: @WSJ   Read full article  
 
Here are some updates on delinquencies. Student loan delinquencies are sharply lower because of the emergency deferral program – “both suspending loan payments and temporarily setting interest rates to zero.” Mortgage delinquencies are lower as well due to the forbearance program.
 
Household credit delinquencies:
 
Source: Federal Reserve Bank of New York  
 
Mortgage delinquencies:
 
Source: Federal Reserve Bank of New York  
 
Student loan delinquencies by age:
 
Source: Federal Reserve Bank of New York  

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3. Many households are concerned about not being able to pay the next month’s rent.
 
Source: @bpolitics   Read full article  
 
4. Regular (state) unemployment benefits are running out for many Americans who have been out of work for a while. They are relying on the emergency programs, which are scheduled to stop at the end of the year (the “income cliff”).
 
Source: @bpolitics   Read full article  
 
5. Consumer confidence shows further signs of strain.
 
Source: Morning Consult  
Source: Morning Consult   Read full article  

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6. Lockdowns are picking up again.
 
Source: Nordea Markets  
 
New COVID cases should peak by the end of the month, but deaths are expected to keep rising for a while.
 
Source: Princeton Energy Advisors  

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7. Airfare prices are gradually recovering.
 
Source: Capital Economics  
 
8. Will high levels of liquidity continue to support economic growth?
 
Source: Variant Perception  


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Canada

1. The CPI moved higher (exceeding forecasts), boosted by the more volatile components.
 

 
Food prices jumped.
 

 
Excluding food and energy, the CPI remains soft.
 

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2. Home prices are now up 8% vs. last year.
 

 
3. The Oxford Economics Recovery Tracker continues to deteriorate.
 
Source: Oxford Economics  


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The United Kingdom

1. Producer prices rebounded from the lows.
 

 
2. Home price gains surprised to the upside.
 

 
By the way, rising house prices could signal higher bond yields.
 
Source: Variant Perception  

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3. Declines in household spending were more severe in the UK than in other advanced economies.
 
Source: @financialtimes   Read full article  
 
4. UK profit margins should rebound, assuming there is a trade deal with the EU.
 
Source: Oxford Economics  
 
5. Regret?
 
Source: @pewresearch   Read full article  


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Europe

1. European bank stocks have been outperforming.
 

 
2. Which countries saw the highest increases in fatality rates over the past two weeks?
 
Source: Nordea Markets  
 
3. Sweden’s home price gains are accelerating again.
 
Source: Nordea Markets  
 
4. Iceland’s central bank cut rates.
 


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Asia – Pacific

1. Japan is facing a third wave, …
 
Source: Pantheon Macroeconomics  
 
… and so is South Korea.
 
Source: Statista  
 
2. The South Korean won fell from a multi-year high after Finance Minister Hong Nam-ki expressed concern about the currency’s strength.
 

 
3. Australia’s employment report topped economists’ forecasts, boosted by a rebound in Victoria (2nd chart).
 

 
Source: ING  
 
The unemployment rate rose less than expected.
 

 
And the labor force participation rate has almost fully recovered.
 


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China

1. China has sold the nation’s first negative-yielding sovereign bond (denominated in euros).
 
Source: SCMP   Read full article  
 
2. Chinese IPOs in the US exceeded $11 billion this year.
 
Source: @WSJ   Read full article  
 
3. China’s share of global import volumes is rising, …
 
Source: TS Lombard  
 
… and so is the nation’s dependence on foreign tech products.
 
Source: Gavekal   
 
4. The economy is less dependent on exports.
 
Source: Scotiabank Economics  
 
5. The pandemic-driven integrated circuits production spike will correct soon.
 
Source: Pantheon Macroeconomics  


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Emerging Markets

1. Indonesia’s central bank cut rates.
 

 
2. India’s retail sales are lagging production.
 
Source: Pantheon Macroeconomics  
 
3. The Turkish lira implied volatility spiked ahead of the central bank rate decision.
 

 
4. South Africa’s retail sales recovery is slowing.
 

 
5. Chile’s GDP recovery will take a while.
 

 
6. Latin America and EMEA equities have underperformed EM Asia over the past decade. Have we reached the bottom?
 
-service
 
7. EM governments are facing much higher debt-service costs than what we see in advanced economies.
 
Source: IIF  
 
8. EM equity gains have been uneven this year.
 
Source: TS Lombard  
 
Here’s a look at EM sector returns year-to-date.
 
Source: TS Lombard  


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Commodities

1. Iron ore prices continue to rally.
 
Source: Reuters   Read full article  
 

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2. Lead prices have diverged from other industrial commodities over the past few months.
 
Source: Capital Economics  
 
3. Platinum has been outperforming gold due to the latest vaccine news (boosted by expected industrial demand).
 

 
4. Rising soybean prices are pushing soy oil futures higher.
 
Source: @markets   Read full article  
 

 
Soy oil, in turn, is putting upward pressure on palm oil prices (now at multi-year highs). Palm oil also got a boost from production concerns in Malaysia (labor shortages).
 


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Energy

1. The Brent curve is flattening (more bullish) in response to the vaccine news.
 

 
2. US gasoline inventories are back above the 5-year average.
 

 
And gasoline demand remains relatively soft.
 
Source: Princeton Energy Advisors  

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3. Iran’s crude oil stockpiles are rising.
 
Source: @bpolitics   Read full article  


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Equities

1. It’s been a good month for the S&P 500 equal-weight index as the vaccine news lifted many smaller firms.
 

 
2. November 9th saw the largest one-day gain in history for the value factor.
 
Source: @financialtimes   Read full article  
 
3. Below is the month-to-date performance by sector and equity factor.
 
Source: S&P Global Market Intelligence  
 
And here is the recent sector rotation.
 
Source: Alpine Macro  

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4. Fewer fund managers are overweight cash than at any time since 2015.
 
Source: BofA Global Research, @WallStJesus  
 
5. Investors have rushed back into equity ETFs over the past week.
 
Source: Arbor Research & Trading  
 
Flows into equity ETFs are now trouncing fixed income and commodities.
 
Source: Arbor Research & Trading  

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6. Fund managers continue to see long tech as the most crowded trade.
 
Source: BofA Global Research, @WallStJesus  
 
7. The price-to-sales ratio shows that US stock valuations are rich.
 
Source: @BittelJulien  
 
8. Who thinks they can beat the market?
 
Source: MagnifyMoney  


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Food for Thought

1. Busiest US domestic flight routes:
 
Source: @markets   Read full article  
 
2. Airbnb domestic vs. international bookings:
 
Source: @chartrdaily  
 
3. Consumer goods data in the US show that this year was about baking, washing, and drinking.
 
Source: @FT   Read full article  
 
4. Biggest importers of US used cars:
 
Source: Statista  
 
5. Views on how well governments have dealt with COVID:
 
Source: Pew Research Center  
 
6. White House executive orders:
 
Source: MarketDesk Research  
 
7. Net gains for Republicans and Democrats since 2016, by county:
 
Source: Reuters   Read full article  
 
8. Sharing articles on social media:
 
Source: @CivicScience  
 
9. How much do Americans like/dislike other countries?
 
Source: @YouGovAmerica   Read full article  

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